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Rating Action:

Moody's Upgrades Five Classes of Merrill Lynch Financial Assets Inc., Series 2003-Canada 10

16 Oct 2008
Moody's Upgrades Five Classes of Merrill Lynch Financial Assets Inc., Series 2003-Canada 10

Approximately $386.0 Million of Structured Securities Affected

New York, October 16, 2008 -- Moody's Investors Service upgraded the ratings of five classes and affirmed 12 classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2003-Canada 10 as follows:

-Class A-1, $84,461,600, affirmed at Aaa

-Class A-2, $243,600,000, affirmed at Aaa

-Class XP-1, Notional, affirmed at Aaa

-Class XP-2, Notional, affirmed at Aaa

-Class XC-1, Notional, affirmed at Aaa

-Class XC-2, Notional, affirmed at Aaa

-Class B, $10,300,000, affirmed at Aaa

-Class C, $13,300,000, upgraded to Aaa from Aa2

-Class D-1, $13,199,000, upgraded to A2 from Baa1

-Class D-2, $1,000, upgraded to A2 from Baa1

-Class E-1, $5,199,000, upgraded to Baa2 from Baa3

-Class E-2, $1,000, upgraded to Baa2 from Baa3

-Class F, $4,054,000, affirmed at Ba1

-Class G, $4,029,000, affirmed at Ba2

-Class H, $2,302,000, affirmed at Ba3

-Class J, $3,913,000, affirmed at B2

-Class K, $1,612,000, affirmed at B3

Moody's upgraded Classes C, D-1, D-2, E-1 and E-2 due to overall stable pool performance, increased credit enhancement and increased defeasance.

As of the October 14, 2008 distribution date, the transaction's aggregate certificate balance has decreased by approximately 14.9% to $392.0 million from $460.4 million at securitization. The Certificates are collateralized by 55 mortgage loans ranging in size from less than 1.0% to 7.9% of the pool, with the top 10 conduit loans representing 33.7% of the pool. The pool includes two loans, representing 13.1% of the pool, with investment grade underlying ratings. Six loans, representing 20.4% of the pool, have defeased and are collateralized by Canadian Government securities.

The pool has not experienced any losses since securitization and currently there are no loans in special servicing. Nine loans, representing 13.6% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of our ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance.

Moody's was provided with full-year 2007 operating results for 84.9% of the pool. Moody's loan to value ("LTV") ratio for the conduit component is 66.6% compared to 69.6% at Moody's prior review in December 2006 and 80.3% at securitization.

The largest loan with an underlying rating is the Sheridan Center Loan ($31.0 million - 7.9%), which is secured by a 540,000 square foot value oriented mixed-use retail and office center located approximately 13 miles west of Toronto in Mississauga, Ontario. The retail portion (59.9%) consists of a community center anchored by Zellers and A&P. The largest tenant in the office portion is Royal & Sun Alliance which occupies 38.3% of the premises through 2018. The center was 97.1% occupied as of June 2007 compared to 92.3% at last review. The loan has amortized approximately 10.5% since securitization. Moody's current underlying rating is A1 compared to A3 at last review.

The second loan with an underlying rating is the Richmond Center North Loan ($20.4 million - 5.2%), which is secured by the borrower's interest in a 716,000 square foot regional mall (309,000 square feet of collateral) located approximately seven miles south of Vancouver in Richmond, British Columbia. The center is anchored by The Bay and Shoppers Drug Mart and is shadow anchored by Sears. The center was 89.9% occupied as of April 2008, essentially the same as at last review. Moody's current underlying rating is Aaa, the same as at last review.

The three largest conduit loans represent 16.0% of the pool. The largest conduit loan is the RioCan Fairgrounds Loan ($24.3 million - 6.2%), which is secured by a 250,000 square foot power center located approximately 50 miles northwest of Toronto in Orangeville, Ontario. Major tenants include Wal-Mart, Commisso's Food Markets, Future Shop and Galaxy Theatres. The center was 98.5% leased as of January 2008 compared to 100.0% at last review. The borrower is a property holding company for RioCan Real Investment Trust ("RioCan"), a publicly traded REIT. Moody's LTV is 71.8% compared to 79.4% at last review.

The second largest conduit loan is The Junction (Phase 1) Loan ($20.1 million - 5.1%), which is secured by a 194,000 square foot power center located in Mission, British Columbia. Major tenants include Sav-On-Foods and London Drugs. The property was 99.4% occupied as of January 2008 compared to 97.5% at last review. The loan sponsors are RioCan and Kimco Realty. Moody's LTV is 71.3% compared to 82.0% at securitization.

The third largest conduit loan is the Lawrence Terrace Loan ($18.1 million - 4.6%), which is secured by a 410-unit apartment complex located in Toronto, Ontario. The property was 91.0% occupied as of March 2008 compared to 87.6% at last review and 100.0% at securitization. The property's performance has declined since securitization due to increased competition. The loan is on the master servicer's watchlist due to low debt service coverage. Moody's LTV is 118.0% compared to 115.2% at last review.

Moody's periodically completes full reviews in addition to monitoring transactions on a monthly basis. Moody's prior full review is summarized in a press release dated December 13, 2006.

Moody's has published rating methodologies outlining our analytical approach to surveillance and our approach to rating conduit and fusion transactions. In addition, Moody's has published numerous articles outlining our ratings approach to the various property types customarily deposited within these transactions along with other articles on credit issues unique to CMBS. The major rating methodologies employed in analyzing this transaction include:

• CMBS: Moody's Approach to Surveillance, September 30, 2002 - this paper provides an overview of Moody's surveillance philosophy, an indication of what prompts a conduit review, how conduit and large loan monitoring is performed, and what our objectives are with respect to post-closing requests and servicer reviews; and

• Moody's Approach to Rating Canadian CMBS, May 26, 2000 -- this paper provides an overview of the Canadian CMBS market, an explanation of our methodology, a discussion of property level analysis, loan level analysis, legal and structural characteristics, portfolio characteristics, diversity, and Moody's rating process.

These methodologies are available on Moodys.com. The analysis of this transaction is consistent with Moody's published rating methodologies.

New York
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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